CAG stresses on management of surplus cash with CPSEs

Government auditor CAG has stressed on strengthening of oversight mechanism for management of cash surplus by PSUs and compliance of norms on payment of dividend and issue of bonus shares.PTI | May 04, 2016, 08:16 IST

New Delhi, May 3: Government auditor CAG has stressed on strengthening of oversight mechanism for management of cash surplus by PSUs and compliance of norms on payment of dividend and issue of bonus shares.

The CAG's report, covering accounts of the CPSEs for the years, 2012-13, 2013-14 and 2014-15, was tabled in Parliament today.

As per the guidelines, all profit making Central Public Sector Enterprises (CPSEs) should pay dividend amounting to 20 per cent (30 per cent in case of Oil, Petroleum, Chemical and other infrastructure companies) of PAT or 20 per cent of equity, whichever is higher.

Out of 36 listed CPSEs selected for audit, 30 have paid total dividend of Rs 1,27,078 crore during 2012-15 period.

Four CPSEs, including GAIL and NTPC, did not disburse minimum dividend of Rs 1,718 crore as required under the Department of Public Enterprise (DPE) guidelines, despite having sufficient profit after tax.

Also, three CPSEs did not disburse minimum dividend of Rs 5,237 crore, due to insufficient PAT, despite having large free reserves, the report said.

"Oversight of Board and the Administrative Ministry may be strengthened over management of surplus cash held by the CPSEs and compliance to DPE guidelines ensured," the report said.

Cash and bank balance (CBB) of 46 listed CPSEs as on March 2015 was Rs 1,62,970 crore.

"An effective cash management system would balance the need to have adequate cash and cash equivalents with the need to channelise surplus cash into income yielding investments to maximise wealth for the shareholders," the report said.

Government is banking on dividend and share buyback from cash rich PSUs to meet its budgetary deficit target.

"High cash balances with the CPSEs raises the two issues: Are the CPSEs paying appropriate amount of dividends to their shareholders (mainly the GOI)? and Do the CPSEs have effective capital expenditure plans in place?" it said.

Utilisation of surplus cash is not included as a financial parameter to monitor performance in Memorandum of Understanding of 23 CPSEs.

The report notes that in case of 27 CPSEs, free reserves were in excess of thrice of their paid up capital.

However, bonus shares were not issued as required by DPE in case of 24 CPSEs, the report said. In case of three CPSEs, Balmer Lawrie & Co, Container Corporation of India and Bharat Petroleum Corporation, even after issue of bonus shares their reserves remained more than three times of their paid up capital.

They did not consider issue of bonus shares as per DPE guidelines, it said.

The total market value of shares of 46 listed government companies (including four subsidiary companies) which were traded during 2014-15 stood at Rs 13,27,781 crore at end March 2015.

The total profit earned by 205 government companies and corporations was Rs 1,37,338 crore of which, 66 per cent was contributed by 48 government companies and corporations under three sectors -- petroleum, coal and lignite, and power.

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